Smaller Walmart stores: A threat to local businesses?

Walmart announced plans to introduce hundreds of new smaller stores. Should small business owners be worried?

ByChad Brooks, BusinessNewsDaily ContributorMarch 16, 2011

In this Dec. 15, 2010 photo, a view of the entertainment section of a Walmart store is seen in Alexandria, Va. In February, Walmart reported a 27 percent increase in fourth-quarter net income, as the world’s largest retailer benefited from cost-cutting and strong sales overseas.

A longtime foe of small business owners, big box retailer Walmart now is threatening to invade their space even further with the introduction of hundreds of new smaller stores.

This time around, though, experts believe small business owners, who often have a loyal customer base and knack for customer service, may not be so outmatched.

“People have learned to compete with them over the years,” said Kenneth Stone, a professor of economics at Iowa State University who has been researching Walmart for more than 20 years. “There are many examples around the country of small businesses that are very astute at offering what the public wants.”

According to Bloomberg News, Walmart is beginning construction this month in Arkansas on three of its new smaller-format stores, which will be just one-tenth the size of the usual 185,000 square-foot Supercenters. The smaller stores will feature a grocery section and a pharmacy.Stone said this isn’t the first time the big box giant has tried a new approach.

“They have been playing around with various formats for years, and they haven’t had too much luck with it,” Stone told BusinessNewsDaily. “I think they are going to have a tough time with this one also.”

Retail expert James Dion agrees it could be a difficult start for the smaller Walmart stores. “It is a whole different world in retail running an 8,000- to 10,000-square-foot store, compared to an 80,000- to 100,000-square-foot store,” Dion said. “Walmart is initially going to struggle with this concept, but I think eventually they will get it right.”

While the thought of a new competing business coming to town is a bit worrisome, one local business in Gravette, Ark., – where Walmart is slated to open one of its first smaller stores – is banking on good customer service to keep its patrons from straying to the new competing retailer.

“It is concerning, but competition is good,” said Lindsey Watford, a pharmacist at the Gravette-based Teasley Drug. “Our customers have chosen us because we really get to know them, and go the extra mile for people.”

Dion said small businesses in the towns Walmart targets for its new stores will need to know their customers better than ever and offer top-notch service to keep Walmart from poaching their patrons.

“That is a way for them to compete with (Walmart) initially and forever,” Dion said. “People will pay a little bit more for good customer service.”